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tv   Book TV  CSPAN  February 13, 2010 9:00pm-10:00pm EST

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but, at the same time, it is far from the bee all end all as i pointed out. texas this had a strong malpractice reform that went into place and it didn't help improve their cost picture there. >> host: last call, louisiana. this is bobby on the republican line. good morning to you. ical kind of fellow. is it necessary to achieve all the reforms we talking about, to create an entirely new branch of the federal government to compensate for this? guest: it i don't have the easy answer to that question. there is a bunch of the functions we have to have agreed although i am someone who would have liked to have seen a government insurance option as a backstop around the country, and
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the plan does not have that. the private insurance plans that would be offered -- even there, a >> even resorting to a world where it is private insurance, we have to have a structure called the insurance exchange that can make it so you have a panel of options available to you. if you have no insurance or access through an employer, it feels that in order to have reform, there are new rules for government, of rules to get rid of pre-existing exclusions and enforcement, and then we have a substantial number of programs trying to improve our health care statistics. we don't have time the information on what the costs of really are we do not know county by county how well we're doing with
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heart attacks and surgical complications that has to be more readily available. although i am very much in agreement that creating more government is a place where we can find ourselves hamstrung by bureaucracy, at the same time we're in a place where leading this system to a self, we're watching they collapse if not all the people harmed by lack of care february disorganized cost and quality of care and feeding to economic troubles. >> host: thank you for spending an hour with the c-span audience today.
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is it. >> first of all, thank you for coming. i should seek their right off the bat i am a friend of hanks for some years and i a admired him before he took the job and i admire him more after the job is done as secretary of treasury. the name of the book is "on the brink" and that is exactly where we where september october of 2008. at that time, our e economy, our financial world went into cardiac arrest and we have four people in the operating room that we were very fortunate as a country we had hey, ben bernanke, tim geithner and
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sheila bair at head of the fdic. i know a lot of people in finance and business and government. i cannot think of four people who would have done a better job to get us through that. it is fashionable to look back and look at one little aspect of what was happening our country's financial system froze up during that period. some of you were at a party i was at september 2008 when the talk of what are the money market funds save? when you have 3.5 trillion of funds held by 30 million people who on a sunday night worry about whether they can get their money, that was half of all deposits. you have a panic. you have commercial paper frees up entirely and some
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of the biggest companies in the united states that are described, worried if they would be payrolls in a short period of time. the six largest bank in the country with domestic deposits washington mutual and the third largest bank, wachovia, needed of shock on a monday morning to survive. most interesting, but this book starts and early september when freddie mac and fannie mae essentially were broke. here are two institutions that guaranteed 40 percent of all residential mortgages in the united states whose debt was held all over the world in very significant amounts by foreign governments but did not take kindly to a default. holding a very large portfolio of mortgages
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themselves. and and early september, they both were broke. it is worth noting for those who take shots at some of the people operating in september and october those institutions were chartered by congress and for those who have criticized the leverage in the banking system, it should also be noted they allowed fannie and freddie to operate with a 40 /1 operating ratio and over 100 times the amount of capital with mortgage guarantees. these institutions are the very integrity of the united states. and which has received in this complicated problem, in a short period, the watchdog
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agency had given a clean bill of health. that might be fun to go back and read that now. let's go on to hanks book and. [laughter] when i got this book by dotted a little early. i expected to learn more of the financial crisis than i did but i did not realize i also learned something about how to attract women. [laughter] i realize it is a little late. but haig has a surefire approach which when he took wendy out on their first-aid in boston, i would like to eight hear about it. >> before that, first of all, i am delighted to be here in omaha. this nablus is just like washington.
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i have been a longtime friend and admirer and he has been a pillar of strength for me during the credit crisis. warren was referring to something in the book. i was not a model of maturity when i was a senior at dartmouth college. we were at the boston pops and when he was not very impressed when i made by program into a paper plane and assailed it. did you hit him? >> no. [laughter] but she gave me another chance. >> host: did you go home early? [laughter] >> guest: she went home early part but fortunately you got a second chance. >> tell us, hanus says i am a tough guy.
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but a wrestler in high school but when the president asks them to become secretary of treasury and hanks initial reaction was not to do with but he decided to do it. he had one big worry it is interesting to make a grown man grumbles. >> he is talking about my mom. i am quite close to my mother, a strong woman and very engaged a and interested in politics, policy, and she was not an admirer of george bush and very unhappy with the war and very interested in women's issues. there was a fair amount of speculation i might go to washington and i would turn down the opportunity a couple times. i assured her the i would not go because i had no intent. but then when i reversed
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myself and decided very suddenly it was the right thing to do not to say no to my country, i was then illinois with my primary residence and on memorial day weekend because the president would make the announcement on the tuesday after. i was going to see my mom but unfortunately i was at church with a longtime friend asked me about what i was doing next day and i told her. of course, she went up to my mom and said isn't this great? she did not think it was a great. with knight arrived to tell my mom she already knew about it. she was sobbing and very angry. angry and crying. and said to me i started with nixon and i ended up with bush and i deserve everything i got.
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[laughter] and i was jumping on a sinking ship. but i will say this in the end, the time i finished and washington, another had a different opinion of george w. bush. but it is not a good way to start off and wendy was not much happier with me. [laughter] >> host: one of the most interesting things in the book, i have heard this before was your account of how some top russian officials had gone into some top chinese officials with the suggestion essentially they started dumping the bonds of fannie and freddie at that time. the animal sounds like the sort of thing evil things with wall street. >> it has never happened.
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very, very concerned about stabilizing fannie and freddie because as more and said there is five port $4 trillion in securities they were either insured or issue directly and highly leveraged institutions. where the securities were howled 1.7 trillion, the biggest portion inside the u.s.. and we had been trying to get reform legislation from congress beginning 2,006 and to get the reforms that we needed but we are unable to get to the action and that they were just on the edge so we're able to go to congress and get the authorities. and what we needed to spend time to pore over their books and understanding the financial situation, and the
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book i recount i was in china for the olympics. it was given to understand the chinese had been approached by the russians with a suggestion that they could sell some of the securities together to test our resolve. who knows. >> host: why? >> guest: i don't know why. but we have had so many conversations with the russians and the chinese, i just knew that any kind of said then selling would spook the markets. and i would say it never happens but when some people say to me anything bad that could have, it felt that way
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sometimes worry about another sudden decline in the dollar or other things that happened, one of the biggest concerns i had was to get fannie and freddie stabilized. and very suddenly how we put them into conservatorship, a essentially guarantees the debt because it was comment in essence an implicit and obligation by the united states of america like the banks had their sins and conduits and the implicit guarantee that is like fannie and freddie we were racing against time to stabilize before bad earnings come out of the banking sector that was a
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race against time and i was fortunate you're able to get it done without the markets becoming spooked or unsettled. when i had heard in china got my full attention. >> there was a full-page article is very much worth reading and there is now 111 billion now plan by the federal government but it is expected sell in the fact is presently looks like the federal will lose more money >> guest: as i look at these programs overall, we will get every penny we put into the banks back with a profit. when you look at all of the other programs you would be surprised at what we get
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back and with fannie and freddie i am thinking the fed will get a lot of money by the securities but you are right in terms of the losses and to be, the important thing of fannie and freddie this right now, the u.s. needs them to play the role they are playing. but one of the things that got us into this problem was not just fannie and freddie but if you look at all the programs to stimulate housing and it is just going too far and freddie and fannie are not going to stay in the present form, the mission needs to be strong and they need to be restructured. i think how we unwind this
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situation. >> host: getting grow by congress they would point* out and did you say the institution they ran have the most leverage at all? >> guest: i was tempted to say a lot. [laughter] but i resisted. but i was pleased to build a relationship on both sides of the aisle before the system collapsed. we easily would have 25 per cent employment with a terrible situation. a crisis, the book to a large extent with market forces and political forces
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what i needed to do was get action from congress. from freddie and fannie was unlimited authorities. but i had to keep reminding people i did not design this thing or create it. >> host: you have relations with the chinese long before this and use that to good effect with the crisis. you tell me china maybe 70 times. what is the public's greatest misconception and economic situation in? >> >> guest: i think that
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we're operating in a global economy. when economies don't do well it hurts us just like it may hurt others. the worst thing that can happen to us and during the crisis is to have had the economy falter and stop growing and looking ahead. we need to try to keep doing well. that is in our best interests. there are plenty of differences in the economic area and others, but i think the most important thing for americans to understand is that there is a relationship both to a large extent
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dependent upon the other. we of course, in the u.s., excuse me, i can you hear me? we don't save enough we tend to save too little as a people and as a nation, we borrowed too much. the chinese savings and capital are very important to the capital markets. the chinese save too much and need to continue to open up their economy to competition and move forward with the reform process and currency and market prevent currency. all of those differences.
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this is a relationship that we need to work hard to get it right. >> host: you would say that and more gentle terms but was sort of a response did you get? with spending more? >> i would simply say that one of the ways we started with george bush is a strategic economic dialogue which is being carried on. one i generally said, we agree on principle. and we need to continue to move the currency to a greater extent determined by the market. with it is a matter of speed. i would be agreeing to move it this far at this period
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of time but they need to move it this far. but we talked very direct the about it. what we need to remember is when dealing with the chinese are any other sovereign nation, we need to put it in terms of what it means to china and their people. i was totally convinced it would only benefit down -- them and get them were they have to get to i believe in free trade and open markets but it will make it easier for me to fight to keep the markets open the view speed up the process of opening your markets. i felt we got a very good
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results implicating at the currency have a a dialogue with the chinese the record will show that i was very proud of the 10 year for a work on energy and the environment. again, we're not going to solve the issues of climate and energy issues among the two biggest importers of oil and e matters of carbon to work together. there's a lot between the two countries. there is very little you can do in this world globally done on a unilateral basis. >> host: mentioning
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president bush, i am a little bit like your mother. [laughter] >> she change her mind. >> host: maybe she will change backed. [laughter] but for the book, i got more appreciation for what she did in this situation situation, various economist , david ricardo or akkadians, i never heard a more eloquent statement that succinctly summed up the economic world that george bush made in september 2008 when he said in a memorable 10 words if money does not loosen up, this suckers can go down. [laughter] tell us.
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it is like the gettysburg address. short but to the point*. [laughter] as i read the book i really need an appreciation for the fact he knew what was going on and understood what needed to be done. is there ever a time? >> guest: no. he was always surprised when i was surprised. i was surprised more than once. [laughter] what was the biggest? >> i would say i spoke to him. one of the things i learned from my previous career is no matter what you negotiate you can have understandings about the relationship of i don't have the right relationship with the president it would not be my fault but his fault. i have one year before the crisis to get to know the
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president and work with him. remember, he went to business school and has a good fundamental understanding of the markets and economic issues. he cares about them. it is a conflict he dealt with was the same conflict i dealt with or anybody. we believe in the united states of america risktakers should bear the responsibility for their own losses. i did not go to washington to do that and he didn't. from day one he understood in the financial markets were about our e economy and jobs. repeatedly i would come to him and i would not have to sell him halfway through the conversation. he would say we will get through this we're not going to look good.
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and this is politically unpopular. we will not lead our economy go down. we will do what it takes to save jobs and the economy. that was his point* of view. talk about my mother and sometimes he was like my mother telling me i needed to work out or get more sleep. [laughter] >> host: in terms of the other it seems going up to the election, he probably felt barack obama was both more knowledgeable and interested in what was going on in the financial crisis and john mccain? >> it is no doubt fair that the conversations i had with john mccain were not as frequent as they were with barack obama. they were more difficult and
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he certainly gave me more anxiety about all of that. now president obama, was attentive and engaged. i felt comfortable he would support what we needed to do. but i am quite grateful to john mccain because i have real respect for him because let me tell you, and elections six weeks away, we went to congress and there was no way, in my judgment had gotten the target john mccain had come out against it. if he had played the populist card, we would have been left defenseless. as i look back by an increasingly grateful of the way he handled himself
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during this period. during that time, i lost a few hours of sleep. >> host: you describe it in one place where you say you issued a veiled threat two but it did not sound very bail to me. >> guest: that is when he came back. there is quite a scene when he interrupted his campaign to come back. i remember i was testifying at the time and michelle davis is here with me today and testifying and handed me a note to. and she said to me, if somebody asks you about john mccain coming back, simply say i welcome the involvement of everyone in
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this and so on because of what was afraid of might come out of my mouth. [laughter] she talked me on the flight on the way down. >> but as it turns out, and again, it was a couple days of anxiety, but again, john mccain spent time with the house republicans rallying them. he did his part. and even after we got the t.a.r.p, he did not jump bonner criticizes things we have done. we were very unpopular. american people, i am proud none of us like bailouts.
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i looked at a poll once and some time after the election, after we had done some of the things we had done, this may be slightly exaggerated, but i recall something like 93% of the american people oppose and 60 oppose -- 60% opposed torture. [laughter] seventy% were worried we would go into something much worse than a bad recession. we have never been able to explain this is not for wall street but for them. >> host: you have these consultations with obama's but i understand it ended after the election first. [laughter]
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both members of the administration broke repeatedly said during the past year they did not anticipate out of some things to be in the economy but from the message you were giving them, let you expected this? >> guest: i did not expect them this stuff. i knew if, there was a scene and the book when ben bernanke and chris cox went up to meet these authorities the tavis war and said much better than i could, the other reasons the financial systems were freezing up. i knew with a certainty that business would turn down.
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it is uncertain if they can raise short-term funding most cfo will say i may not be able to have all of the money for the next 30 days what is a prudent company do? they start to cut back. they had not seen it in their district so i knew with a certainty it would get worse. i am not sure i knew it would be 10% unemployment but i knew it would be bad. i knew that if they did not do something and it collapsed, then businesses would not be able to pay for the inventories and pay suppliers and lead to the employees go to ripple through the economy and have armageddon.
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so when the economy did turn down, a terrible situation as congress saw it because they sought as the american people saw its. we said give us these authorities said if you doubt we will be will be in trouble. it will be bad. it is very hard to get credit for preventing a disaster. >> host: did you really get on your knees to plead with nancy pelosi? [laughter] >> i did. but understand i was in a cabinet room witness saying both senator mccain and
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senator obama was there in the middle of the campaign with the congressional leaders where not only do we not come together, it broke out people did not come to physical blows but it was verbal blows a and chaos. and the democrats assembled in the roosevelt room. by wind and uninvited. i did it just to try to break the tension and to get a smile or laugh tour. it did not really have the desired effect. [laughter] i remember as i recall in the book, i said please do not go out and a blow this up and the speaker said we are not the ones that blow with up.
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she was right. >> host: you have seen how government operates abroad, nobody has a better perch on which to view the economy and to return trends about the economy going forward. as i understand it, when you were secretary you had to have your money in a blind trust that now presumably it is over. don't give me the names of stocks although you are free. [laughter] but give us the idea of the composition in terms of bonds or stocks or what portfolio could you establish? >> first of all, you are a great investor. you do very good and very careful work. one of the things i learned during my career, i am not a
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great investor. i need to find great investors. i believe the system, the financial system is stable, the banking system is in better shape. i do believe clearly the recovery process has begun. you and i have a common worry about the fiscal crisis. >> host: we will get to that. >> guest: you have the best line i have ever heard that relates to that. you just need to understand also that what wendy and i are looking to do we will develop the balance of our careers to conservation and the environment and that is where our money is going. we're not looking to make
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more but keep what we have. i am not looking at it with a long-term horizon because i continue to believe that to invest in high-quality companies. that is what i believe in. when i was a young person i will look at companies that have good, strong market positions for the long term. i have a lot of what is fixed income markets to pay cash because the others that i have in growth equities because i still believe the economy can go down or sideways or what ever. but outstanding well-managed companies particularly those that know how to operate globally will prosper over a long period of time.
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that is a way to look at investments over a period of time. i don't put too much steak and quarterly economic data. the right way to look at it is over a longer period of time. >> host: you said substantial fixed and come. does that mean you do not worry about the decline of the value of currency? >> guest: you are certainly not going to get a former treasury secretary. [laughter] because i really do believe and i worked very hard that the strong dollar is just very much in our interest and the essential to the success and the pre-eminence of the united states of america. i believe that the best way to have a strong dollar is again looking over a long
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term view, have a strong economy and to have fiscal discipline. i will not tell you what i think will happen with the dollar the next five or 10 years, but what i really focused on because we tend to give away a lot of the money and a relatively short period of time. >> host: so making you the trustee for my children and said fixed income with you prefer stocks or bonds or the straight bonds? >> i give up. i take your advice. >> but i would ask myself the question that gets backed to where you go, which is that gets the currency a little bit.
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i have spent a lot of time outside of this country with all of the major economies. and believe me, every other major economy, china included as many more our city of mccann challenges and problems than we do. they really do. we are the richest and strongest economy in the world that we have to deal with a relatively few very important challenges. the biggest is the fiscal crisis. i should not call it a crisis because it is not a crisis immediately but a challenge immediately. what i've learned and write about in this book, it is very difficult to get to government to back to get
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congress to act to do anything fed is paid or difficult or controversial unless there is an immediate crisis. we had the immediate crisis and still have not brought the regulatory reform that we need. i again, that is critical. i have no doubt we will deal with this fiscal challenge at some point* in time. but the earlier the deal with it the less costly it will be the greater the nation and less bird in the end third-generation will have to bear. >> host: going back to fall 2,008 of september fell eight -- 15, at that point*, are really on the friday there was no extent of aig problems even though
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they would go cascading but you do have a big problem with lehman and calling together wall street. you thought you had barclays signed up and they wanted to be but they've ran into problems with the british government subsequently. but it seems to me for getting about lehman brothers even if you have merrill lynch, i think you and i would agree they would go almost instantly. what would happen if bankamerica had not made this deal on that sunday? >> guest: they would not have lasted in my judgment one week. what people mess and it is easy to mess, is this was a doozy.
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the use excesses had been building up for a long time. i knew we were overdue for a credit crisis and i told the president that when i came to washington. i did not expect anything of this magnitude but it was building up in the united states. but it is still working its way into the european system but has been building up for a long time. the institutions are sitting on losses and we were pressing them to recognize losses and raise capital. simultaneously on the same weekend we learned about the extent of aig problems on saturday. lehman brothers, we have already started. merrill lynch was right there so you have those three institutions and as warren said, we have
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washington mutual shortly thereafter and wachovia and over the next weeks we had six european nations have to step in to recognize who this comes in pretty quickly from all sides. >> host: it is ironic. but having an appetite for this, in effected he did not make good deal, he offered a 70% premium the next day and might had been a o didn't he save the system? >> he was a confident and decisive and ceo. there is no question it was a stabilizing action.
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>> host: would we get to aig action if not for merrill lynch? >> i don't know because i don't think we could take one other big institutions. the system would is hard for people to understand, we have 10 institutions that have 50 or 60% of the financial assets in this country and it is so interconnected, in many ways, we were, but it is terrible. we are pretty fortunate. >> the british had been you
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a warning about the situation a couple of days earlier. but in the fact they blocked the barkleys acquisition of lehman brothers. do you think they understood ? >> guest: i don't know everything they understood but remember, there is a requirement for a shareholder. >> host: but we overcame a lot of things in this country. >> guest: but we needed a buyer that could do what jpmorgan did with bear stearns to guarantee trading during shareholder vote because there was no
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authority to do this in the u.s.. what people have a hard time understanding because we are the united states of america and i had a hard time until i started to turn over every stone to see what authorities we had, there is no authority to guarantee liabilities or plant capital into institutions. in any event, i am not sure what the british were, i have used some brash language when i was disappointed. but as i said in the book and reflected on it, and they obviously have their own issues they are looking at and the regulator, for them was a very difficult decision to let one of there
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bakes go ahead in the middle of a run in the middle of lehman brothers step then and make the acquisition and the confident to have the wherewithal to do that. >> host: the mayor brothers did go down on that sunday. and barclays' had a limited part of a much smaller transaction tuesday are what wednesday i guess the british authorities said if you have an account even keeping your securities there, you could not take it out. they froze the accounts basically a. that was a big surprise to you? that was a big surprise to me. >> guest: that shocked the market's. my recollection is it was to stay but i could be wrong. because i recall learning
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about it tuesday that was actually the day that was the at aig rescue. by what happen to, the collateral third-party accounts, they were frozen for while and investors needed to know their accounts were safe. of course, with lehman brothers and the u.k., there is a big erosion of confidence in the investment-banking model. >> host: that would not have been in the united states. you have access to your securities. it was not publicized but it is a huge shock. >> guest: not with me. remember the sec was a
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regulator. it was the regulator for remember others and was the one that had the lead in preparing for the bankruptcy because we knew that would be a possibility and we hope to avoid it. they're the ones that would have been talking to the various authorities during that period of time. but it sure came as a surprise to a lot of investors and to me. >> host: we own a huge investment banking and trading firm that is the only family assets. we cannot sell it. we always tell people who are making lots of money money, you are head of the compensation committee. what arrange mid do you have? anybody me 25 or 50 million
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per year? how will you treat these people so they keep making money for us and don't go someplace else? >> we have to talk about what it is. >> host: today? [laughter] >> guest: today, you have to know as we write in the book and have these conversations with wendy all the time during the nine periods, that the compensation levels on wall street are out of whack. i think you would to. it is general. #1. number two, in light of everything going on, and the fact the taxpayer came in
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and, granted the reason it did was to prevent calamity but to help the whole financial system, not just the investment banks, had to funds and everyone, good today restraint is very much in order. i think fainter is coming from if you have losses, you are supposed to bear responsibility for those losses. the way i talk about it, instead i would like to see that anger channeled and have congress, feel pressure. i know they are working on a very hard to get regulatory reform we need so you don't ever have to have tax payers come in and prop up bailout in the present form of a feeling the financial institution we need
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authority so any type of financial institution, if it is going to fail, i can be liquidated outside of the bass group's the process in the way to take the financial system down and the economy down with that. i would like to see congress get that done with the systemic risk regulator to look at every institution no matter what the size or type of face the risks that are prudent, restrain them. and terms of longer term compensation clearly you need compensation. i feel that it should be an equity for the high paid people and should be something that rewards long-term performance and has the incentives of the
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individuals with the company and the shareholders. >> host: are we getting the puck? >> gentlemen, we are done. [laughter] >> host: thank you. [applause]
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